The most significant event of the last week was that the Senate passed the tax bill. I strongly urge you to read the article below from Forbes. Although the House and Senate still need to massage the disparities in the two bills that have been passed, it is clear change is here. At first blush, it appears many in the Bay Area will be paying more taxes with the changes.
As for the impact on Bay Area real estate, well that will most likely depend on what price tier one is in. It is too early to know for sure how each of us will be directly affected. I have heard that prices could drop by 10%. However, I believe that is extreme. We have too many factors that affect prices; and tight inventory levels put upward pressure on prices.
For now, focus on your business (see commentary below). Tax planning meetings are more important than ever due to all the new changes. I expect many of us in business will need to review several options to determine whether entity changes (moving to a corporation for example) will end up saving significant taxes.
Remember, our clients will be struggling with all of these same issues. And, there will be some hesitation in decision making as clients grapple with wrapping their heads around the expected changes and the financial impact on them individually. Be patient, be informed, and help clients through all of this until things settle down a bit.
Commentary: Low Real Estate Inventory Approach
For those of us associated with the real estate industry, we have heard the lack of inventory story for some time now. And from what I hear, this trend looks like it will continue for the foreseeable future. Note that there are buyers in both the commercial and residential markets; yet finding suitable properties has been difficult. Instead of just sitting here hoping the market will change, I want to be a bit more proactive and work with a select few of my business partners towards strategizing on ways to succeed regardless.
Each of us has strengths and weaknesses. My goal with my core business partners has always been how can I help them achieve more and be integral to their success. Being an analytical and a problem solver, I enjoy working with professionals that are receptive to ideas other than their own. I do realize that many folks want a game plan handed to them. Unfortunately, meeting with this group is not a good use of time for anyone. Devising an approach that utilizes your unique skills takes effort, time, and commitment.
Now I am willing to help; and here is what I ask in return.
- Be open and receptive to new ideas or slight modifications to things that already are working well.
- Once a strategy is established, act on it. Otherwise all of this is just a waste of time.
- Find a way to reciprocate. If you just take and don’t give back, then there is no incentive to going further in our relationship.
- Ask questions and be completely engaged.
If this is of interest to you, then please feel free to give me a call to determine if we should engage in this approach. This is business dating; and it is okay for either one of us to say no. If we are not a good fit (and you still like this approach), then find another person that you feel fits you better.
There really is only so much business out there; and there will be professionals who decide they do not wish to fight through this cycle. My goal is to work with those that are committed to their success, their clients’ success, and the success of those in their virtual team.
That’s it for this week. As always, I welcome any of your strategic financing questions.
Articles of Interest:
Redfin reported “A Third of Homebuyers Will Consider Moving to Another State if SALT Deductions Are Eliminated.”
The SJ Mercury News reported “Google in San Jose? Look what happened with Amazon in Seattle.”
Forbes reported “Winners And Losers Of The Senate Tax Bill.”
| Type | Rate | Fixed Term |
| Apartments | 4.005% – 4.680% | 3 to 10 year (30 yr amortization) |
| Commercial | 4.325% – 4.980% | 3 to 10 year (25 yr amortization) |
| Construction | Call for Rate | Call for Rate |